Sumitomo lays out ambitious growth plan through 2035

KOBE, Japan — With global rights to the Dunlop brand secured, Sumitomo Rubber industries Ltd. (SRI) is embarking on a long-term growth strategy that will focus on leveraging premium tires and expanding the firm's non-tire business activities.

The overriding goal of the new business plan, dubbed RISE 2035, is to double the firm's operating profit margin by 2035 into the 15% range, SRI documents show.

By comparison, SRI reported business profit in fiscal 2024 of $581 million on sales of $7.99 billion, yielding an operating ratio to 7.3%.

Short for "Rubber/Resilience/Reliable, Innovation, Solution, Evolution." the RISE 2035 strategy prioritizes investment in certain target areas to achieve short-term and long-term, SRI executives said during a March 7 conference call.

One of the key goals under the new strategy will be to accelerate sales of premium tires under the Dunlop brand globally and Falken brand, predominantly in North America.

Among goals the tire maker has set for itself are to create "new value experiences derived from rubber," strengthen brand-management and create a more resilient organization that supports the mobility, sports, medical-care and consumer industries.

Much of SRI's 10-year plan is centered on growing the proportion of premium tires to 60% of total tire sales, from 40% currently, while building new "revenue pillars" in non-tire and other growth areas.

Overall, SRI expects to generate 70% of its earnings by 2035 from tires, with the other 30% coming from non-tire developments. The fiscal 2024 ratio stands at 87% tires and 13% non-tire, according to SRI.

The company did not publish its sales revenue targets for 2035, preferring to focus attention on its efforts to improve profitability. Goodyear estimated the value of Dunlop-brand products it sells at more than $750 million annually.

To achieve its earnings goals, SRI said it will tap into its "visualization" technology to enhance "rubber-value creation."

These will include further investment in process R&D, and the establishment of an "innovation lab" in North America by 2026 and a "quantum computer innovation center" by 2028 in Japan.

SRI also will promote the use of "cutting-edge" technology, while increasing collaborations with universities and startups as well as pursuing merger/acquisition activities.

In rubber innovation, SRI said it would leverage its proprietary "active tread" technology, which enables tire rubber to adapt to changes in road surfaces and driving conditions.

A further target is to develop differentiated 'active tread' premium products using new "compounding, design, and development process technologies."

To deliver technological advances, SRI is adopting an "in-house factory" manufacturing strategy, one that will focus on upgrading parts of existing factories with advanced equipment to enable high-tech manufacturing without halting the entire production operation.

SRI expects to carry out the upgrades across plants in Japan and Thailand, the latter of which has been designated for exports, particularly to North America.

The company will, therefore, invest in increasing production capacity for larger rim--diameter tires for SUVs and pick-up trucks at these locations.

Other bases, including plants in China, Indonesia, South Africa, Europe and South America, will focus predominantly on producing tires for local markets.

In the period 2025 to 2027, SRI said it aims to strengthen the Dunlop brand, through "unification of Dunlop identity" and improve profitability by promoting premium tires.

In 2028-2030, SRI will promote global brand-management centered on Dunlop, and then leverage established brands, focusing on cash-flow generation and securing a strong market position.

For the second half of the 10-year period, SRI said it aims to expand its non-tire "growth businesses" and transform its portfolio, with a focus on "continuous innovation in products and services."

In financial terms, the group said it had achieved its medium-term targets ahead of schedule and therefore revised its targets for profit margin to 10% in 2027 from 7% last year and is aiming for 15% by 2030-2035.

SRI said it expects structural reforms and cost-cutting in management processes, as well as the Dunlop acquisition to help it achieve the margin.

The group has also revised upward its targets for return-on-equity, to 12% in the long-term with the mid-term goal 10% by 2027, and return-on-invested-capital (ROIC) to 8% by 2027 from 6% currently, and targeting 10% for 2030-2035.

In RISE 2035, SRI aims to "continue to provide everyone with new experience value created from rubber, leveraging our strengths of rubber and analytical technology," SRI said.

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European Rubber Journal contributed to this article.